Friday, September 18, 2009

The world is preparing to abandon the U.S. dollar and the UK pound. Pronouncements from Hong Kong, the United Arab Emirates, Switzerland and Germany have made clear that the Anglo-Saxon financial system’s doom is only a matter of time.

A huge announcement out of Hong Kong rattled the financial world on September 3. Although big media relegated the story to the back pages, it should have been front and center! What’s the news? China is demanding its gold back.

The announcement, coming in the midst of the global economic crisis, is sending a clear signal: Britain is in far worse economic shape than generally realized, and China thinks it needs to get its gold out while it can—before something happens to it. Gold closed at a new record high of $1,006 per ounce on Friday. (more)

The Treasury Department said Thursday it will issue $112 billion in notes next week. A record $43 billion in 2-year notes will be sold on Tuesday, followed by $40 billion in 5-year debt on Wednesday. The final offering will be $49 billion in 7-year notes on Thursday. The amounts are each $1 billion more than last month -- the most ever for each security -- and in line with estimates of some of Wall Street's biggest bond dealers. The government will also sell $85 billion in shorter-term bills. After the announcement, 2-year note yields, which move inversely to prices, remained up 1 basis point on the day, at 1%, the highest this month

Oil prices edged lower on new U.S. government data that indicated a slow economic recovery.

That would mean less demand for energy in the near term and increased the chance of low-priced gasoline and heating gas for some time.

Benchmark crude for October delivery slipped three cents to settle at US$72.47 a barrel on the New York Mercantile Exchange. Prices crested at $73.16 a barrel in morning trading, the highest that crude has reached this month.

At the pump in the United States, retail gas prices dropped nearly a penny overnight to a new national average of $2.55 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Gas prices are now falling away from the peaks reached in June at the outset of the driving season, when a gallon hit $2.69. (more)

The Gold Rush of 2009 likely hasn’t come as a complete surprise to too many investors. After all, gold has been proven time and time again to be a “safe haven” investment that rises during uncertain economic times (such as the last two years), and questions about the dollar’s future as the world’s reserve currency (along with other factors placing downward pressure on the greenback) have led many to reconsider their strategic holdings.

But the length and degree of the run-up in gold prices certainly caught a number of investors (myself included) off guard. Brett Arends poses a question I would have laughed at two years ago, but now take quite seriously: is it realistic to think gold could really go to $3,000?

As a writer, it's always a disappointment when something which you see as being among the best or most important examples of your work receives less attention than other pieces. Sometimes this can be due to nothing more than a poorly-worded title, however, what it usually

means is that a writer did not do a good enough job of explaining or highlighting the material which is of greatest significance.

It is with this in mind that I have decided to repeat a discussion which I had focused on in a previous commentary. In that commentary, I discovered what I believed (and still believe) to be the most important piece of data I have unearthed since I started writing about this sector.

It came from one, simple graph – on global silver inventories, over roughly a 50-year time horizon. The chart was compiled by the CPM Group, a private consultancy that is one of two quasi-official sources for supply and demand data in the precious metals sector, which we all must rely upon. (more)

Over a year ago, when signs were starting to point to a recession, my colleague John Reeves and I compiled a list of the previous recession's top 10 stocks to discover any patterns that would help our investing this time around. That list provided a number of fascinating insights, some of which we had expected, while others surprised us.

I recently updated the list, and while the names may have changed from a year ago, the general lessons remain the same.

Our screen looked for domestic and Canadian stocks that were valued above $250 million and traded on major exchanges -- stocks the individual American investor would have been likely to actually buy. (more)